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Progress and Differences on Incentives for Reducing Emissions from Deforestation

In the international climate negotiations in Ghana, countries strongly reiterated the critical importance of incentives to assist developing countries in efforts to reduce emissions from deforestation and forest degradation. With these emissions accounting for up to 20% of the world’s global warming pollution, there continues to be strong support from all countries that this source of emissions needs to play a central role in the agreement to be reached in Copenhagen. A spirit of agreement that has continued from Bali.

So, no one backed away from this spirit but did we make progress in the important discussion on how best to and from what sources to mobilize incentives for countries to assist in reducing their deforestation and forest degradation emissions. After all, the “devil is in the details”. We made progress on a number of fronts, but some differences still remain.

Both emissions reductions from deforestation and energy sectors are critical. There was agreement amongst all countries that we need both reductions in deforestation emissions and the energy sector if we are to address global warming—a point made repeatedly by a number of countries. Solving global warming will require significant progress on both the energy and deforestation fronts by 2020.

Need incentives for countries with large tracts of tropical forest that are in the various stages of deforestation. Countries are at various stages of deforestation, roughly: (1) current high rates of deforestation (e.g., Brazil and Indonesia); (2) currently low deforestation rates, but high risk of increased rates in the future (e.g., Congo Basin Countries; and (3) historic high deforestation rates, low current rates due to past efforts, and small risk of increased rates (e.g., Costa Rica). Because forest products are traded globally and some of the drivers of deforestation are the result of international drivers, countries agreed that there needs to be properly designed incentives for all countries to ensure that reductions in one country don’t lead to increases elsewhere (i.e., “leakage”). This is a movement from the previous situation where you had countries in each stage essentially elbowing to get incentives for their state of deforestation or to make their stage of deforestation the main focus of incentives.

Source of the Incentives. Countries put forward a number of proposals for providing incentives to reduce deforestation emissions in Ghana. There was agreement that significant and sustained funding needs to be effectively delivered. However, differences remain on the source of those incentives—now loosely grouped into three categories: (1) fund-based; (2) market-based; and (3) market-linked (e.g., a portion of revenues from auctioning of allowances). Proposals put forward include (click on link to see their presentation):

Coalition for Rainforest Nations proposed a three stage path for the incentive structure: (1) assistance for being ready to participate in reducing deforestation emissions; (2) scaled-up funding from various sources, but probably only pilot carbon market approaches; and (3) incentives directly from the global carbon market.

Brazilcontinued to propose not linking emissions reductions from deforestation to the carbon market in a way that could be counted as offsets towards emissions reduction targets in developed countries.

Tuvalu proposed a number of approaches, including a pledge from each country to set aside a portion of the revenues from auctioned allowances in emissions trading systems (e.g., as was proposed in the U.S. Lieberman-Warner bill and is under consideration in the EU).

EU suggested that incentives should be performance-based (e.g., for delivering emissions reduction), reward real reductions in emissions, and be consistent with long-term sustainable land management. These mechanisms could be supported by “diversified funding sources, including carbon market-linked approaches”.

US said nothing; however, there were provisions in the recent climate bill before the US senate to provide incentives for reducing deforestation emissions in developing countries. Will the US start to engage in the conversation?

So, there was significant progress in spelling out incentives for reducing deforestation in developing countries, but differences remain between countries. It will be critical to begin to quickly narrow down these differences in order to get agreement in Copenhagen.